Rental property owners
Accounting for Chicago Rental Property Owners
Schedule E per building, depreciation, 1099s
What this business files
Form numbers and dates. A deadline landing on a weekend moves to the following Monday.
- Schedule ERental income and expense, reported per propertyWith the personal return, April 15
- Form 4562Depreciation, at 27.5 years for residential buildingsWith the return, each year the property is held
- Form 1099-NECIssued to contractors paid $600 or more when the rental is a trade or businessJanuary 31
- Form 1040-ESQuarterly estimates once rental profit is large enough to oweApril 15, June 15, September 15, January 15
Where owners lose money
We watch for these on every file in this trade.
- An owner-occupied two-flat splits every shared cost by square footage or by unit, and the split has to stay consistent for as long as the building is held.
- A roof is a capital improvement depreciated over decades. A repair to the same roof is deductible now. Coding one as the other is the most common error on a landlord return.
- Chicago requires interest paid on security deposits held under the Residential Landlord and Tenant Ordinance, and the rate is set each year.
- Depreciation is recaptured on sale whether or not it was ever claimed, so skipping it saves nothing and costs the deduction.
Services this trade uses
One fixed monthly fee, agreed before the first month. Catch-up on prior periods is quoted once.
Rental property
Common questions
I live in one unit of my two-flat. How does it work?
The rented portion goes on Schedule E and the portion you occupy is personal. Shared costs such as the roof, the boiler and the water bill are split on a reasonable basis, usually square footage or unit count. Mortgage interest and property tax split the same way, with your share going to Schedule A.
Do I need to send 1099s to my handyman?
When the rental activity rises to a trade or business, yes, for anyone unincorporated paid $600 or more in the year. Collect the W-9 before you pay the first invoice, since chasing it in January rarely works.
Do rental losses come off my other income?
Rental losses are passive and limited. An owner actively participating with income below the phase-out deducts up to $25,000 a year, and anything above it carries forward until there is passive income or the property is sold. Real estate professional status changes the answer and has strict hour requirements.
What happens to depreciation when I sell?
Depreciation allowed or allowable is recaptured and taxed on sale, at a rate of up to 25%. Never claiming it does not avoid the recapture, so the deduction is worth taking every year. We model the number before a sale so the tax is not a surprise at closing.
Get your price this week
The first conversation is free. We read three months of statements, quote a flat figure and hold it. We reply the same working day.